BHP CFO Committed to Solid A Rating That Brings `Opportunities'by and
Credit rating creates buffer for downturn, according to Beaven
World's biggest miner reported 92% slide in first-half profit
BHP Billiton Ltd., the world’s biggest mining company, is committed to retaining its “solid A” credit rating as it navigates a downturn in commodity prices.
“Having a ‘solid A’ strong balance sheet through the cycle creates the buffer for the bottom of the cycle,” allowing the company “to take advantage of opportunities,” Chief Financial Officer Peter Beaven said Tuesday in an interview with Bloomberg Television. “We’ve seen some of our competitors run into some issues," he added.
Standard & Poor’s cut the mine operator’s credit rating this month to A from A+ because of reduced estimates for commodity prices amid “very challenging market conditions.” S&P said at the time that the ratings may be lowered another notch, below the “solid A” level, following the miner’s first-half earnings results, which BHP reported on Tuesday.
The biggest commodity producers have been battered by falling prices sparked by gluts in raw-material supplies and waning growth in demand from their biggest customer, China.
BHP’s underlying profit fell to $412 million at its continuing operations in the six months to Dec. 31, from $4.9 billion a year earlier, it said Tuesday. Its first-half dividend was cut to 16 cents from 62 cents a year earlier and the company said it will adopt a policy to provide payouts at a minimum of 50 percent of underlying attributable profit. The dividend had been forecast to drop to 31 cents, according to data compiled by Bloomberg.
BHP may need to raise as much as $10 billion through a share sale and scrap its dividend if it’s to retain the stated commitment to its credit rating, Richard Knights, an analyst at Liberum Capital Ltd., wrote in a report last month.